Client facing: Affinity – a breed apart

What do some of the biggest brands in the world have in common? They ‘lend out’ their brand to insurers and brokers under a white-labelling agreement, also known as an affinity partnership. Affinity clients are some of the most sought after and lucrative out there – but they are also a breed apart.

Affinity partners are by their nature trusted brands, such as major retailers or High Street banks. While they don’t underwrite themselves, their insurance operations are often sizeable and headed up by experts with a background in the insurance industry. These clients know what they’re looking for – they are educated, informed and demanding. They can also be highly rewarding.

“All affinity clients are slightly different, but there are some common themes,” says Peter Thompson, managing director of Junction, one of the UK’s biggest affinity brokers.

One of the most critical elements of success between an affinity partner and insurer is strong alignment of values and strategy from the very beginning”

Barry Smith, Ageas

The first thing an affinity client will look for is a partner that will understand their brand, embrace its values, and protect the brand when representing it to customers. It’s a huge position of trust, and for this reason affinity partnerships usually take many months to establish and typically last a minimum of five years - sometimes as many as 10.

It almost goes without saying that customer service is a foremost concern when it comes to protecting the brand. Perhaps less immediately obvious is the affinity partner’s requirement for an insurance footprint matching their own customers. “Nothing frustrates a brand more than if they put together a general insurance proposition and finds that it is uncompetitive in areas of their own footprint,” says Thompson. “That footprint match has to be strong and competitive across the piece, which is why panel arrangements are often very attractive.”

Alignment
Clients are also increasingly keen that the insurance purchase entails a link back to the parent brand - for example, a rewards programme. Once an affinity client is satisfied that their core brand is adequately protected, they will look to the financial aspects of a deal. “Alignment with the commercials is hugely important,” says Thompson.

“Many of the large players have been through two, three or four generations of this and learnt that what really helps drive success is alignment between their partner and themselves in the financial goals and objectives of that partnership. Without that, you pull in two different directions and that inevitably creates problems.”

Ageas chief executive Barry Smith agrees. “One of the most critical elements of success between an affinity partner and insurer is strong alignment of values and strategy from the very beginning,” he says. “It may be an obvious point to make, but it is critical because it creates the framework allowing the partnership to grow in a way that suits both parties.”

Clients have different capabilities and requirements around how much of their insurance business they want to manage themselves. Some might have existing contact centres that they want to use, for example, so flexibility by the insurer and broker is crucial.

Innovation

Finally, Thompson says innovation is increasingly important, with affinity partners wanting their clients to be able to use mobile contact methods as easily as they used the phone 10 years ago.

Once established, an affinity partnership’s success depends on the ability of the partners to work closely together. The best affinity partnerships are more like joint ventures than one-off deals - in fact some, such as the Tesco-Ageas affinity, actually are joint ventures.

For Junction and one of its affinity partners, Marks & Spencer, this means a series of monthly meetings between key teams, such as finance, marketing and customer services. This activity is overseen by a steering group, which meets quarterly.

Paul Stokes, M&S Money’s head of customer proposition, says: “The relationship really has to be hand in glove. I walk around our offices in Chester and I see people talking to the insurers, talking to the brokers. There’s a rhythm and routine to it – that’s the way it needs to be.”

Tough conversations
So, being prepared to spend a lot of time with an affinity partner is important - and it might not always be easy. Affinity brands run major financial operations, and the best invest heavily up front. This means clients will often use experts drafted in from the insurance sector.

Thompson says: “Brand partners are pulling in experts from the industry to head up those areas. The level of investment that has gone in has been very significant, especially over the past five or six years.

“These clients are classic poacher turned gamekeeper - they are as au fait with affinity deals as you would expect anyone within the professional general insurance business to be. They understand what it takes to make a brand work effectively.”

So, does that mean some tough conversations around profits and margins? Thompson concedes: “While it may bring challenges in terms of margin pressure and that sort of thing, you find it’s far better dealing with those professionals that really understand your industry - you can move through much quicker as partnerships.”